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Crude nears $83 as inventories ease

Associated Press / March 18, 2010

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NEW YORK — Oil prices settled near $83 a barrel yesterday after crude inventories grew less than expected last week, and the stock market rose on the Fed’s promise to keep interest rates at record lows.

Benchmark crude for April delivery rose $1.23 cents to $82.93 a barrel on the New York Mercantile Exchange.

The Energy Information Administration said crude inventories rose last week by a million barrels to 344 million barrels. Analysts expected a build of 1.9 million barrels.

The Dow Jones average rose 47.69 points to close at 10,733.67. Investors were reassured by the Fed and Japan’s central bank, after both reaffirmed plans to keep interest rates low to spur the global economic recovery. Oil and gas demand are expected to increase as economies recover and businesses hire more workers.

Meanwhile, the 12-nation Organization of Petroleum Exporting Countries meeting in Vienna has decided not to cut back production targets, sticking with levels held since December 2008.

Despite sluggish oil demand in the United States and other developed countries, oil analyst Andrew Lipow said global economic indicators support higher prices.

“The big news is that the economies around the world have stabilized from their abyss a year ago,’’ Lipow said. He added that the energy demand outlook shows signs of hope given that the EIA, the International Energy Agency, and OPEC have all bumped up their forecasts for the year.

Not everyone thinks happy days are here again for the economy or that higher oil and gas prices can last.

“The Kool-Aid that has been offered, and apparently drunk by oil market participants is that the recession is over and the long slog back to prosperity has begun,’’ said MF Global analyst Mike Fitzpatrick in a research note. Fitzpatrick said the Fed’s comments about “high unemployment, modest income growth, lower housing wealth, and tight credit’’ underline the demand challenges ahead.

Retail gasoline prices rose yesterday. The nationwide average added 2 cents at $2.789 per gallon according to AAA, Wright Express, and Oil Price Information Service.

Pump prices have risen 17.3 cents in the last month and are now 87.9 cents higher than levels of a year ago.

In other Nymex trading in April contracts, heating oil rose 2.52 cents to $2.1395 a gallon. Natural gas fell 4.4 cents to $4.303 per 1,000 cubic feet. Earlier it hit a new 52-week low of $4.280.